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Chip maker VIA Technologies yesterday announced details of a closer union with US graphics chip designer S3, days after Intel stepped up its legal battle with the Taiwanese company. Under the terms of the deal, S3 and VIA will set up a joint venture, tentatively named S3-VIA inc, to produce chips combining their respective technical expertise. The two companies have been working together informally for about a year. S3 will hold 51 per cent of the joint venture, with VIA controlling the remainder of the shares and the board. VIA has also taken a $25 million stake in S3. The graphics chip maker plans to reciprocate with a similar investment in VIA, although the complexity of Taiwan's legal system has delayed this, said S3's president and CEO, Ken Potashner. The joint venture will produce chipsets which incorporate S3's 3D graphics technology. Chipsets are a vital component used on the main circuit board of all PCs. PCs with graphics integrated into the chipset cost less than PCs which use a separate graphics chip. Increasing competition in the markets for both chipsets and graphics chips is encouraging companies to cooperate. VIA and S3 are already manufacturing samples of the new chipset, said CEO Wen-Chi Chen, and would start mass production "early next year." Different versions of the chipset will be available to support desktop and notebook PCs. A version which supports Advanced Micro Devices' Athlon CPU is also under development. Potashner said his company planned to integrate its next generation graphics technology into VIA chipsets, as the technology is developed. VIA shipped 3.1 million chipsets last month, exceeding predictions, said Chen, and would have sold four million if last month's earthquake had not interrupted production. According to Taiwan's Market Intelligence Center, VIA supplies around 25 per cent of global chipset demand, with Intel controlling around 50 per cent. Industry observers say that increased competition from VIA is behind recent lawsuits filed by Intel. The suits charge VIA, and some of its customers, including sister company First International Computer (FIC), with patent infringement. The first chipset to be developed by the partnership, the Savage 4NB, will also use the patented Intel technology at the centre of the dispute. However, Chen said he was confident his company would win the legal battle. In a press statement today, FIC said the suit would not affect its production of motherboards using the disputed VIA chipset. A source at VIA said that relations with another US graphics chip design house, Trident, had been patched up following an acrimonious dispute earlier this year. Trident took legal action accusing VIA of poaching its employees. A chipset incorporating Trident's graphics technology will be released before the Savage 4NB, the source said. ®

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